Volatility is the name of the game | Bill Baruch breaks down the action | Morning Express
E-mini S&P (December)
Last week’s close: Settled at 3316.25, down 34.75 on Friday and 7.00 on the week
NQ, last week’s close: Settled at 10,927, down 148.25 on Friday and down 121.25
Fundamentals: U.S. benchmarks remained vulnerable through Friday, setting new swing lows following the expiration of September futures and options at the opening bell. Added selling ensued overnight after leaked files from FinCEN were published showing that banks filed trillions of dollars’ worth of Suspicious Activity Reports (SARs). More specifically, it signals banks were very aware of suspicious activity, but did little to slow it down. All major banks are down sharply with the SPDR XLF -3% ahead of the bell. Some of the largest around the globe are getting hit the hardest; Deutsche Bank -7%, HSBC -5% and JPMorgan -4.5%.
Today’s news is a great example as to the market paying attention to the headlines it wants; something we often discuss. If stocks have not already been vulnerable, or in a healthy correction pattern, we may not be seeing such damage across the banking sector weighing on the market broadly. Investors and managers are already in a defensive position and this certainly can help exacerbate the impact of headlines. However, this comes as the banks have been clear laggards during the Covid-19 recovery and their profitability is in question amid ZIRP.
Also driving sentiment are U.S.-China relations and Washington. On one hand President Trump approved the ByteDance-Oracle deal, on the other ByteDance did say it would not transfer any technology. On Friday, Supreme Court Justice Ruth Bader Ginsburg passed away. Her death has quickly brought added tension to Washington ahead of the election. President Trump announced his plan to nominate a replacement, a move that would be starchy fought by his opposition and begs to tie up bandwidth for a potential fiscal deal. Meanwhile, the second wave of the Covid-19 pandemic makes its way through Europe causing the U.K. government to tighten restrictions.
Fed Chair Powell speaks at 9:00 am CT. He will be followed by Fed Governor Brainard at 11:00 am and Dallas Fed President Kaplan at 5:00 pm along with New York Fed President Williams.
Technicals: We have steadfastly held a cautiously Bearish Bias, but overnight our downside target in the S&P was achieved at 3246.50-3253. Overall, there is nothing telling us the market will reverse its losses today, but it is certainly a good time to take a breather if you played the bulk of this healthy correction we called at the onset of September. There are critical levels on both sides of the ball today. To the upside, major three-star resistance in the S&P first comes in at 3282.25-3289.75, previous support and lows from last week is now strong resistance. Above there is a gap settlement from Friday at 3316.25. Similarly, for the NQ, we have 10,904.25-10,927 as major three-star resistance, encompassing settlement. However, continued action below 10,861 will leave the bears in the driver’s seat for a test to rare major four-star support at 10,489-10,558. A close back above resistance levels today will pave the way for higher action through midweek; lthough our target has been hit, the path of least resistance is lower until such happens.
Resistance: 3282.25-3289.75***, 3305-3307**, 3316.25***, 3323.25-3326.25***, 3335.25**, 3357.25-3363**, 3379.50***
Support: 3246.50-3253****, 3202.25-3212.50**, 3172.75-3183.50***, 3038.25-3047.75****, 2972-2983.50***
Resistance: 10,904.25-10,927***, 10,990**, 11,072***, 11,150-11,174**, 11,255-11,295***
Support: 10,777**, 10,489-10,558****, 10,371***, 10,283-10,301***
Crude Oil (November)
Last week’s close: Settled at 41.32, down 0.10 on Friday and up 3.67 on the week
Fundamentals: Crude Oil is lower along with the risk-environment, but relatively battling to hold ground well. CFTC Commitment of Traders data from Friday, for the week ending last Tuesday, showed that bulls defended the weakness that ensued around Labor Day; Managed Money longs increased positioning by a net 30k contracts. Still, the Managed Money net-long position is 20% below its recent peak. The bulls are leaning on a narrative that has China setting a fresh record for U.S. Crude Oil imports in September. However, the Covid-19 pandemic and fresh outbreaks are weighing on the demand landscape. Data from India showed a 23% drop of Crude imports in August versus one year ago. Although, a continued drawdown of U.S. inventories is a supportive narrative coupled with the comments from OPEC last week, the bull-case is shrinking in the near-term.
Bill Baruch joined Yahoo Finance on Friday to discuss Crude’s landscape.
Technicals: We believe last week’s snap back will be short-lived in the near-term as Crude tracks broader weakness. Price action on Friday failed at major three-star resistance at 41.57-41.72 and has since moved back below our momentum indicator at 40.75 which aligns with previous support at 40.51 to be our Pivot; continued action below here and furthermore a close through major three-star support at 39.67-40.15 leaves the door open for a retest to the $36 area.
Resistance: 41.57-41.72***, 42.19-42.33***, 43.24***, 43.78-44.05***
Support: 39.67-40.15***, 39.15**, 38.55***, 36.36-36.58***, 35.54**, 34.09***
Last week’s close: Settled at 1962.1, up 12.2 on Friday and 14.2 on the week
Fundamentals: Gold is getting whacked this morning as the U.S. Dollar strengthens amid a heavy wave of risk-off. The argument from last week is that the Federal Reserve did not take a more dovish than expected tone and instead provided a baseline for what it needs to see in order to raise rates; maximum employment and inflation symmetrically through 2%. Furthermore, it defines no QE-infinity. The immense weakness in Gold today and through the early part of the week will prove to be a good long-term buying opportunity, however, patience will be key as some technical support levels may be broken and trigger added selling.
Technicals: Gold has chewed through major three-star support at 1928-1932. This is a crucial level as Gold tests into our next major three-star support at 1907.4-1909.6. Despite trading to a low of 1874.2 on August 12th, Gold’s lowest close is 1923. Overall, patience is needed as the metal looks to be priming for a flush through these supports, one that we think is a tremendous long-term buying opportunity from lower levels.
Resistance: 1949.9**, 1958-1962.1***, 1973-1976.6***,1987**, 2001.2**, 2020-2028***
Support: 1907.4-1909.6***, 1889.6**, 1874.2**, 1845.4****, 1829.8***
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